How to Maximize Your Credit Card Rewards

Credit cards are often portrayed as tools of evil. While you can certainly get in over your head with a credit card, the reality is that with the right approach, a rewards credit card can help your finances.

The right credit card rewards program can provide you with extra cash, free travel, and other perks. I use credit card rewards all the time. Plus, with the addition of other loyalty rewards programs, it’s possible to earn more rewards faster.

I’m not a true rewards hacker, but I do derive benefits from my credit card rewards. By doing a few simple things, it’s possible for you to save money on some of your lifestyle choices — without the need to spend a lot of time or energy on managing your rewards.

Create a Spending Plan

Your first step should be to create a spending plan that you can stick to. Spending on credit cards doesn’t provide you with a net benefit if you constantly carry a high-interest balance that negates the value of your rewards.

Put together a spending plan that reflects your priorities, and make an effort to keep it within your means. Figure out how much you have to spend on groceries, gas, insurance, emergency savings, retirement accounts, and other regular spending.

Your spending plan should be the cornerstone of any effort to maximize your credit card rewards without ending up in deep debt.

Find a Rewards Credit Card that You Will Use

Once you have a solid spending plan in place, it’s time to find a credit card rewards program that you will use. Consider your priorities when choosing a rewards card.

If you like to travel, a miles card can be a good choice. For those with a preferred airline, this makes even more sense because you can usually get double miles with a branded card. I have a credit card branded with a specific airline. Whenever I use that credit card to make an airline purchase, I get double miles. Sometimes there are special promotions that offer higher rewards values.

My parents have a co-branded credit with a hotel chain. They get extra points and are able to earn free nights faster. They don’t fly much, but they do go on road trips regularly. As a result, this arrangement works well for them.

You might have other priorities. A cash back card might be the best option for you if you prefer to just enjoy the money. Figure out what perks matter most to you, and what goals you have, and apply for a credit card that fits those priorities.

Review Signing Bonuses

Many credit card rewards programs come with signing bonuses. If you can get an amazing signing bonus, you will get even more value out of your credit card. Many travel credit cards offer bonuses that are large enough to cover the cost of a round-trip plane ticket. Hotel-branded cards usually provide a signing bonus that will get you between one and three nights free at a property. Cash back bonuses can range from $50 to $300, depending on the card and what you qualify for.

A good signing bonus on a rewards card that you will use regularly can really help you maximize your rewards. It’s important that you pay attention to the terms, though. You might need to spend a set amount within a limited period of time ($3,000 over the course of three months is common) in order to qualify for the bonus. Make sure that your spending plan allows for this type of spending without you ending up unable to pay off your balance at the end of each month.

Don’t forget to consider annual fees. Some credit cards will waive the annual fee for the first year. After that, you need to decide if you want to get involved in credit card churning (it’s always been too much effort for me to churn), or if you are willing to keep the card and pay the annual fee. In some cases, it can actually be worth it to pay the annual fee. I pay an annual fee for my airline rewards card. However, the rewards I earn, and the perks I get (including free checked bags and priority boarding) more than make up for the annual fee. By the time I get two or three free flights a year, plus free bags, I’m well ahead, even with the annual fee.

Carefully weigh the options, and decide what’s worth it for you. I know people who happily pay the annual fee for a credit card that offers 6% cash back on groceries (and 3% on gas) because they spend enough on groceries and other purchases every year to more than account for the annual fee. The higher cash back on the things they purchase most often exceeds what they would get with a no-annual-fee credit card with a lower payout, even accounting for the annual fee they pay.

Pay for Whatever You Can with a Credit Card

The next step is to pay for whatever you can with your credit card. I use my credit card for anything that will let me. I’ve set up automatic billing for my Internet and my streaming entertainment services. I pay my utilities with a credit card. All of my grocery shopping are done with a rewards credit card.

Even my recurring charitable donations are made with a credit card. My landlord accepts a credit card, so I pay my rent using a credit card. In fact, my rent alone is worth one airline ticket each year.

Not all payments are an option with credit card. Some insurers won’t accept credit card premium payments, and most banks won’t let you pay your car loan or mortgage with a credit card. For these types of payments, you have no choice but to use your checking account. But if you can use your credit to pay for something, you should do it. It’s one of the best ways to rack up rewards quickly.

Besides, these are things you would buy anyway. It makes sense to get a benefit from this regular spending.

Stack Your Credit Card Rewards

Now that you have a basic framework for earning credit card rewards, you can start boosting the value of your credit card spending with the help of loyalty program stacking. This is one of the best ways to maximize your rewards without the need to become a full-on rewards hacker. A few tweaks to the way you do things can make a difference, and bring you greater value. Here are some of the ways to squeeze a little more out of your credit card rewards programs:

Rebate websites: There are a number of rebate websites that can provide you with cash back, discounts, and additional points, depending on the program you use. With these websites, you start out with your regular online shopping from a specific portal. As you make regular purchases (remember: only make planned purchases that fit with your spending plan), you are awarded points or straight cash back.

If you use your credit card to make these purchases, you get your regular credit card rewards, PLUS the rewards from the rebate site. I am signed up for Swagbucks, and I installed a browser extension designed for shopping. When I complete my regular online purchases using my credit card, I earn Swagbucks that I then redeem for gift cards to Amazon, at the same time I get rewards from my credit card. It’s two rewards for one purchase.

Many of those who prefer straight cash back credit cards do very well with rebate websites. What if you make a $100 purchase through a rebate site? First, check for an online promo code to see if you can get free shipping, or if you can get another discount. Then, use your rewards card to pay, getting your cash back. You can then collect more cash back when the rebate is deposited in your account. If you have a rotating category card, pay attention to what’s going to give you a higher payout to receive even more benefit.

Layer loyalty programs: You can also layer your loyalty programs. Even though I don’t have a co-branded credit card for hotels, I do belong to a loyalty program. Every time I stay at a hotel in the program, I earn points toward a free night’s stay at the same time I earn more miles toward my next free airfare.

This approach can also work when booking travel through aggregators. Orbitz, Expedia, and Travelocity all have loyalty programs that allow you to earn discounts on bookings. On top of that, these are programs that also cooperate with rebate sites. One of my approaches is to book flights through Orbitz, after activating my Swagbucks shopping bonus. I pay with my credit card and make sure I enter my frequent flyer number. Now I’m getting points with four different programs with a single purchase, upping the value of my rewards without the need to make an additional purchase.

It’s important to understand all the applicable terms with these programs, however. I don’t earn hotel loyalty points when booking through a third-party website, so I usually avoid booking my hotel through Orbitz. However, I do let my Orbitz rewards pile up until I end up staying in a hotel that isn’t part of my loyalty program (this happens when I visit my grandfather in a remote town with only one hotel). Understand the terms and limitations so that you are able to get the most value out of your efforts.

Partner programs: Don’t forget about partner programs. My airline loyalty program (which is connected to my miles card) is a partner with my hotel loyalty program, as well as my preferred car rental company, and with Amtrak. This means that when I book with these partners, I get extra points with other partners as well. Spending with my miles card to get a train ticket might mean a few extra points for both programs.

One of the perks I have with one of my credit cards is discounted car rental. I get between 25% and 35% off my car rentals when I use the partner and pay with my credit card (plus, I get the car rental insurance coverage free as a credit card benefit). However, because I belong to that partner’s loyalty program as well, I get points on top of the discount. That’s extra perks for one purchase, saving me a little more money when I rent a car.

Understanding the relationships between your credit card rewards program and partners can help you save money when you preferred partners that you would choose anyway.

The right approach to stacking can work similarly to stacking your coupons — only this results in cash back and free travel.

Know the Cost of Your Benefits

The main pitfall to avoid when using these tactics to maximize your credit card rewards is that you might get stuck in a rut, using the same chains over and over again — even though they cost more. In my case, I would use my preferred providers no matter what. The cost is worth it to me. I’ve stayed in discount hotel chains before, and used “cheap” car rental companies. The savings aren’t usually enough to make up for the lack of convenience and service I’ve experienced.

Because convenience, comfort, and service are very important to me, I’m willing to pay extra for them. I take that into account when I choose my programs and use my credit card. The good news is that many lower-cost companies and services also have loyalty and rewards programs that you can use to your advantage. Pay attention to your own priorities and habits as you put together your plan.

Another option is to avoid the issue of loyalty altogether and use a cash back credit card. If you want to amass enough to essentially make your travel free (no matter which airline or hotel chain you use), you can keep all of your payouts and rebates in a high-yield account, saving up until you have enough to pay for a plane ticket or a hotel stay. You might be surprised at how fast your travel fund can grow when you use your cash back card for everything, and make all your purchases through a rebates website.

Stepping Up Your Game: Rewards Hacking

These strategies are very basic, and require only a little tweaking to make sure that your regular spending in various places is coordinated to help you get the most value in rewards.

However, there are entire websites devoted to true rewards hacking. These are resources that can help you learn how to get to the point where you can travel for free almost all the time, based on spending strategies that work for you. Often, true rewards hacking also includes credit card churning, and employing strategies that allow you to cycle through rewards programs, depending on your current goals. I don’t get into this because it requires more attention to detail. It can be worth it if you get really into it, but it’s not something I care much about. My simple hacks work well enough for me, and provide me with enough benefits.

No matter how you decide to proceed, remember that this only works if you pay off your balance regularly, instead of racking up interest. Plan your spending ahead of time, and then use it to your advantage to get more from your credit card rewards program.